The Health Care Select Sector SPDR Fund (XLV) and the Schwab U.S. Broad Market ETF (SCHB) are both among the Top 100 ETFs. XLV is a SPDR State Street Global Advisors Health fund and SCHB is a Schwab ETFs Large Blend fund. So, what’s the difference between XLV and SCHB? And which fund is better?
The expense ratio of XLV is 0.09 percentage points higher than SCHB’s (0.12% vs. 0.03%). XLV also has a higher exposure to the healthcare sector and a lower standard deviation. Overall, XLV has provided higher returns than SCHB over the past ten years.
In this article, we’ll compare XLV vs. SCHB. We’ll look at annual returns and portfolio growth, as well as at their holdings and industry exposure. Moreover, I’ll also discuss XLV’s and SCHB’s fund composition, performance, and risk metrics and examine how these affect their overall returns.
FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).
|Name||Health Care Select Sector SPDR Fund||Schwab U.S. Broad Market ETF|
|Issuer||SPDR State Street Global Advisors||Schwab ETFs|
The Health Care Select Sector SPDR Fund (XLV) is a Health fund that is issued by SPDR State Street Global Advisors. It currently has 27.88B total assets under management and has yielded an average annual return of 15.02% over the past 10 years. The fund has a dividend yield of 1.4% with an expense ratio of 0.12%.
The Schwab U.S. Broad Market ETF (SCHB) is a Large Blend fund that is issued by Schwab ETFs. It currently has 21.44B total assets under management and has yielded an average annual return of 14.43% over the past 10 years. The fund has a dividend yield of 1.39% with an expense ratio of 0.03%.
XLV’s dividend yield is 0.01% higher than that of SCHB (1.4% vs. 1.39%). Also, XLV yielded on average 0.59% more per year over the past decade (15.02% vs. 14.43%). The expense ratio of XLV is 0.09 percentage points higher than SCHB’s (0.12% vs. 0.03%).
NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).
The Health Care Select Sector SPDR Fund (XLV) has the most exposure to the Healthcare sector at 100.0%. This is followed by Technology and Industrials at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Financial Services (0.0%), and Real Estate (0.0%) only make up 0.00% of the fund’s total assets.
XLV’s mid-section with moderate exposure is comprised of Consumer Defensive, Utilities, Communication Services, Energy, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.
The Schwab U.S. Broad Market ETF (SCHB) has the most exposure to the Technology sector at 24.15%. This is followed by Financial Services and Healthcare at 13.88% and 13.37% respectively. Basic Materials (2.45%), Energy (2.78%), and Real Estate (3.58%) only make up 8.81% of the fund’s total assets.
SCHB’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Consumer Cyclical, and Healthcare stocks at 5.76%, 9.29%, 10.52%, 11.9%, and 13.37%.
XLV is 86.63% more exposed to the Healthcare sector than SCHB (100.0% vs 13.37%). XLV’s exposure to Technology and Industrials stocks is 24.15% lower and 9.29% lower respectively (0.0% vs. 24.15% and 0.0% vs. 9.29%). In total, Consumer Cyclical, Financial Services, and Real Estate also make up 29.36% less of the fund’s holdings compared to SCHB (0.00% vs. 29.36%).
|Johnson & Johnson||9.19%|
|UnitedHealth Group Inc||8.01%|
|Thermo Fisher Scientific Inc||4.2%|
|Merck & Co Inc||4.17%|
|Eli Lilly and Co||3.87%|
XLV’s Top Holdings are Johnson & Johnson, UnitedHealth Group Inc, Pfizer Inc, Abbott Laboratories, and AbbVie Inc at 9.19%, 8.01%, 4.64%, 4.36%, and 4.21%.
Thermo Fisher Scientific Inc (4.2%), Merck & Co Inc (4.17%), and Eli Lilly and Co (3.87%) have a slightly smaller but still significant weight. Danaher Corp and Medtronic PLC are also represented in the XLV’s holdings at 3.61% and 3.54%.
|Facebook Inc A||1.88%|
|Alphabet Inc A||1.66%|
|Alphabet Inc Class C||1.61%|
|Berkshire Hathaway Inc Class B||1.19%|
|JPMorgan Chase & Co||1.06%|
SCHB’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc A, and Alphabet Inc A at 4.86%, 4.61%, 3.33%, 1.88%, and 1.66%.
Alphabet Inc Class C (1.61%), Berkshire Hathaway Inc Class B (1.19%), and Tesla Inc (1.18%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the SCHB’s holdings at 1.13% and 1.06%.
FYI: Another great way to get exposure to the real estate sector is by investing in real estate debt. Groundfloor offers fantastic short-term, high-yield bonds that can add diversification to your portfolio!
The Health Care Select Sector SPDR Fund (XLV) has a Treynor Ratio of 21.1 with a R-squared of 58.19 and a Mean Return of 1.27. Its Standard Deviation is 12.94 while XLV’s Beta is 0.7. Furthermore, the fund has a Alpha of 7.75 and a Sharpe Ratio of 1.13.
The Schwab U.S. Broad Market ETF (SCHB) has a Standard Deviation of 14.12 with a Alpha of -0.58 and a R-squared of 99.33. Its Treynor Ratio is 13.58 while SCHB’s Sharpe Ratio is 1. Furthermore, the fund has a Beta of 1.04 and a Mean Return of 1.23.
XLV’s Mean Return is 0.04 points higher than that of SCHB and its R-squared is 41.14 points lower. With a Standard Deviation of 12.94, XLV is slightly less volatile than SCHB. The Alpha and Beta of XLV are 8.33 points higher and 0.34 points lower than SCHB’s Alpha and Beta.
ALSO: Small-cap equities can add a lot of upside to a portfolio while mitigating risks. Recently, I've discovered Mainvest's investment platform which makes it easy to invest in small and local businesses with returns of 10-25%. Take a look here (link to Mainvest).
XLV had its best year in 2013 with an annual return of 41.24%. XLV’s worst year over the past decade yielded -2.83% and occurred in 2016. In most years the Health Care Select Sector SPDR Fund provided moderate returns such as in 2011, 2020, and 2012 where annual returns amounted to 12.44%, 13.33%, and 17.56% respectively.
The year 2013 was the strongest year for SCHB, returning 33.37% on an annual basis. The poorest year for SCHB in the last ten years was 2018, with a yield of -5.25%. Most years the Schwab U.S. Broad Market ETF has given investors modest returns, such as in 2014, 2012, and 2010, when gains were 12.67%, 16.22%, and 17.1% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in XLV would have resulted in a final balance of $42,899. This is a profit of $32,899 over 10 years and amounts to a compound annual growth rate (CAGR) of 15.02%.
With a $10,000 investment in SCHB, the end total would have been $36,354. This equates to a $26,354 profit over 10 years and a compound annual growth rate (CAGR) of 14.43%.
XLV’s CAGR is 0.59 percentage points higher than that of SCHB and as a result, would have yielded $6,545 more on a $10,000 investment. Thus, XLV outperformed SCHB by 0.59% annually.
Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:
P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!
1) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!
2) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).
3) Groundfloor is another great way to get exposure to the real estate sector by investing in short-term, high-yield real estate debt. Current returns are >10% and you can get started with just $10.
4) If you are interested in startup investing, check out Mainvest. I've started allocating a small amount of assets to invest in and support small businesses. Return targets are between 10-25% and you can start with just $100!
To see all of my most up-to-date recommendations, check out the Recommended Tools section.